KOLKATA: Telecom operators in India are on an overdrive to acquire additional 4G capacity spectrum to spruce up networks in terms of speed and riding video content amid the sharp upsurge in data consumption levels, analysts and industry experts said.

Bharti Airtel’s decision to buy Tikona Digital’s 4G business, they said, reaffirms the faith among the established carriers in 4G capacity spectrum to maintain high quality customer experience in the future. This comes amid expectations of price rationalisation in the next 12-18 months, now that Reliance Jio Infocomm’s free services are drawing to a close by the month-end.

“When you see a monumental jump in data consumption demand in a very short span, any Jio competitor will need to tank up on 4G capacity spectrum at the earliest to support comparable data services offerings to ring-fence the experience of upper-tier customers, especially video content,” Sanjay Kapoor, a former CEO of Bharti Airtel told ET.

Jio, he said, has almost “overnight triggered a near thirtyfold jump in data offered to subscribers” to 28 GB per customer per month on average from 750-900 MB per customer per month earlier, which is the principal trigger for incumbent carriers to invest in 4G capacity spectrum in the 2300 MHz and 2500 MHz bands.

Incumbents, he said, will need to transform quality and capacity of their existing mobile broadband networks “to be able to seamlessly handle a manifold jump in data consumption levels in the coming quarters since there is a new normal set by Jio by way of its bundled offerings”.

Swiss brokerage UBS said the recent pickup in M&A activity reflected in Bharti Airtel’s recent acquisitions of Tikona and Telenor’s 4G airwaves along with the Vodafone-Idea Cellular merger suggest that “industry RoIC (return on invested capital) levels are unsustainably low, and spectrum ownership and ability to spend capex will be key in surviving in a high data volume environment”.

Earlier this month, Jio’s GB-rich ‘Prime’ offerings propelled the country’s top three mobile carriers — Bharti Airtel, Vodafone India and Idea Cellular — to unleash equally aggressive counter-offers to prevent customer churn. Telcos have been bulking up on capacity spectrum, particularly airwaves in the 2300 MHz band, which emerged as the key 4G band in the October 2016 auction.

Experts said that Jio and Airtel’s additional purchases of 2300 MHz spectrum had prompted the No. 2 carrier, Vodafone India, and the third largest operator, Idea Cellular, to target more affordable capacity airwaves in the 2500 MHz band to sustain competitive edge in their leadership markets, although commercial deployment is unlikely in this 4G band for the next 12-18 months in the absence of a suitable devices ecosystem.

Kapoor, however, said that investments in 4G capacity spectrum alone won’t do the job, asserting that these will need to be “backed with sizeable capex/opex in electronics (base stations, routers and antennae), backhaul and customer experience to make meaningful sense of the raw material, as in capacity airwaves.

Another senior industry executive, who did not wish to be identified, said that a telco’s data capacity and coverage will need to be “optimally synchronised with riding apps, content, services and devices to create a quality customer experience, which will then give competitive edge”.

Brokerages UBS and JM Financial said that Bharti Airtel has sufficiently reinforced its capacity spectrum following the Tikona deal as it now has 30 MHz blocks of 4G airwaves in the 2300 MHz band in as many as 13 out of the country’s 22 telecom circles.

Analysts at JM Financial said that Airtel effectively has “the highest spectrum holding in the industry with an aggregate 1505 MHz of pan-India spectrum holdings across all bands”, which is 22% more than Jio’s total airwaves bank.

The senior executive cited earlier disagreed, though, saying, “If the future of voice is VoLTE and that of data is LTE, having a huge bank of spectrum segregated across 2G, 3G and 4G platforms won’t make sense as a telco’s competitive edge vs Jio would primarily stem from its quantum of pure 4G spectrum holdings”.

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